Question: How to solve this problem? (and which formula is used for Co on the second pic?) Options on Indexes and Currencies = = Example Suppose

How to solve this problem?

(and which formula is used for Co on the second pic?)

Options on Indexes and Currencies = = Example Suppose that so = $50, 0 = 0.4463, K = $50, T = 0.5, and the risk-free rate is r= 2%. Find the price of the American call option today by using the two period binomial model. Assume that the stock yields dividends at rate q = 10%. = Question: If, in the example above, the option were European call would it price be also equal to $.........? Why? 19: 6/19 Sw=78125 Que 20.01.2010 - 6.8 Options on Indexes and Currencies C $12.5 E(Su-klities v = 24 004 Erc" x(0.4004x18340) u250 x (12.5x9.9004 to) USD CA = (u? So K)+-28125 #498 So udSo dSo Chd = (udSo - K)+=0 -0.060.15 CA CA CA il dso cd = (dSo K)+ .. S

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